Money management is one of those topics that many discuss, but is properly understood by only a few people. Every individual needs to be in equilibrium with their finances, but financial stability isn’t something that may be quantified solely on basis of your bank balance or your monthly earnings. An individual with a low income or bank balance can also be considered financially stable.We’ll take a look at what defines financial stability and discuss some parameters by which you can measure the same:
How to Measure your Financial StabilityArun Sharma September 25, 2019
1. Save Money Without Stress
Three are two types of savings in general- habitual saving and forceful savings. If you are struggling to meet your financial needs, you have the start saving forcefully. After saving forcibly for a few months, your financial health will gradually improve. Over the time your condition will improve, and then you don’t have to struggle, saving money will turn into a monthly habit and you will be able to save effortlessly.
2. Happy With Financial Condition
The first indication of financial stability is that you’re happy with your financial condition. Make sure that your funds are under your own control and handling your finances should bring joy instead of panic. After spending your income on monthly expenses, you should have enough funds left to tackle some unexpected commitments.
3. Prepared for Financial Emergencies
A financial crisis can come in various ways like automobile repair journey, job reduction, emergency and so forth. If you aren’t financially fit, situations like these can make to stressed. But if you are able to take of these unexpected scenarios without borrowing or getting into debt. It means you have good control over your finances and you are financially fit.
4. Your Debt-to-income is Under 30%
Your debt-income ratio defines how much debt you are currently in. A higher ratio means you are using a significant amount of your salary in paying off ongoing debts. Each individual must attempt to get rid of debts. Very low or no debt ensures stability, they provide reassurance to understand that you’re not under any debt.
5. Festivals Don’t Bring Worries
There are many individuals who take a personal loan to cover extra expenses during festive seasons, purchasing an anniversary present, birthday present etc. For being financially stable, you must have enough saving in your bank account to enjoy precious moments of life. You need to realize you’ve freedom when you have the ability to celebrate festivals without affecting your monthly budget.
6. Selective About Purchasing
For being stable in life, its beneficial to spend money on buying assets whose value will appreciate over time. You can put money into wealth building purchases like gold, land, stocks etc. Instead of investing in things like bike, car, electronic whose value will decrease over time.
All these 6 parameters will help you to assess how much you have achieved and need to achieve for having stable personal finances. Planning your monthly budget and following it properly is the first step towards achieving the state of freedom. Only attaining financial freedom is not what one should aim to, being consistent with the finance is also a considerable success of any individual.